Large profits in banks increase the likelihood of a windfall tax on creditors

Big profits at banks increased the likelihood of a surprise tax on lenders.

Barclays was the latest to report third-quarter results, posting a £2bn profit on the back of rising interest rates and buoyant activity among its trading clients.

But CS chief executive Venkatakrishnan – known as Venkat – warned chancellor Jeremy Hunt that higher bank charges could hit the UK’s competitiveness.

“London has been the world’s financial center for centuries and we want it to be the world’s financial center for centuries to come,” the 56-year-old said.

“It has all the possibilities — infrastructure, excellent financial control. “An important part of this is a predictable tax regime. “Those are the ingredients that go into it — and it’s important that those ingredients are there.”

In Santander UK, the profit reached 496 million pounds. Standard Chartered, which is listed in London but makes most of its money in Asia, received 1.2 billion pounds. European lenders, which are also in the crosshairs of governments over the windfall tax, were also in the money.

Deutsche Bank reported one of its strongest quarterly results since before the financial crisis, while UBS, Unicredit and Santander’s Spanish parent bank Banco Santander also beat expectations.

Lenders have been helped by rising interest rates, which means they can charge borrowers more without raising savings rates, making a net profit on the difference. At Barclays’ UK arm alone, this so-called net interest income reached £4.3bn in the third quarter – up 10% on last year.

Investment bank lenders such as Barclays have also been hit by market volatility as their clients trade more frequently.

Barclays’ unit, which deals in bonds, currencies and commodities, saw revenues jump 93 per cent to £1.5bn. That has helped offset a decline in investment banking fees from deal-making as the M&A wave that swept the world last year subsides.

In Santander UK, the profit reached 496 million pounds

But the bank’s performance was hit by a £327m fine imposed by US regulators for a trading error in 2018. Barclays and its rivals have also been forced to set aside more money to prepare for credit to deteriorate as households and businesses struggle with the economic downturn.

Barclays wrote off £381m in the third quarter, although Venkat said there were no signs of stress in the loan book. Families were being smart, he added, remortgaging early to lock in lower rates and cutting back on non-essentials like clothes.

Santander also set aside £138m for the purpose. Barclays shares fell 0.3 per cent, or 0.4p, to 149.82p, while Standard Chartered fell 5.1 per cent, or 28.4p, to 526 penny

John Moore, senior investment manager at investment group RBC Brewin Dolphin, said: “There is a caveat that [Barclays’] statement and little news in terms of earnings for shareholders – perhaps in response to the recently announced prospect of a surprise tax on banks.’